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While it's easy to see how a distrust of others may inhibit economic growth, is it possible that "too much trust" can also present problems for economic growth? Here is an interesting paper by Roth examining this question wh ...View full contribution

Correlation does not imply causation, however the video seems to suggest that high levels of trust cause increased quality of governance and higher schooling, which in turn cause higher levels of growth. Could we not consider the opposite to be true? That better quality of governance and the rule of law, and more schooling, lead to higher trust. For example, I can imagine a very trusting society getting all of a sudden poor quality of governance and after a while, after being disappointed over and over again, losing that initial trust and that affecting the way businesses are run, etc... and hence negatively affecting growth.

I agree. The statement that trust is highest in countries that are "more likely to apply laws in a fair and just manner" points to the circularity of the argument being made.

In fact, good governance can obviate the need for "trust" between individuals; one instead trusts that the system will work as intended. The FDIC and the SEC, for example, came into existence because trust can be misplaced and/or abused. Good governance, in the form of the FDIC or SEC, means that most people no longer need to "trust" the businesses with which they invest their savings. It is trust in the system, not between individuals, that restored the banking system in the 1930s and allowed for economic growth, instead of panic, in subsequent downturns.

Christine, can you point me to a study which claims that the banking system regulations in the 1930s laid foundations for economic growth? I think this is a rather wild assumption, given the fact that there are tons of variables involved and that the „banking panics” albeit frequent, were also relatively short.

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Perhaps the causality can be hypothesized to run in both directions i.e. trust and economic growth are mutually reinforcing. If this is true, then it isn't incorrect to say that trust causes higher levels of growth - it just isn't the whole story.

It may be that trust is a by-product of prosperity and effect -not cause- of development? truth is associated with some certainly that the other party will do what promises, maybe in wealthy environments this is more probable than where people is starving, maybe that explain why crime is more frequent between poor people

The problem of causality is tackled by Robert Putnam book on social capital differences between North and South Italy (Making Democracy Work). He is able to overcome those problems by running regressions of the level of social capital in the early 1900s and how they are related to economic growth and governance 70 years later.

On the other hand, the experience in Guatemala is that crime is not more frequent between poor people. But it is more frequent in more unequal settings. Poor indigenous communities tend to be less violent than unequal urban settings.

This is a reasonable question! Interestingly, the video says trust decreases with population heterogeneity and wealth (wealth increase is meant I guess, if not this doesnt make sense as wealthy countries like Norway have a higher trust). I think social inclusion and wealth distribution play a big role for trust, so comparing this findings with the Gini index would be interesting. I think the video could have put more emphasis on informal institutions which really matter a lot.

The chicken or the egg dilemma ;) I tend to think that cooperative behaviors such as trust, solidarity and so on, are probably conducts reinforced by good results, honesty flourish where is convenient act honestly and vice versa, so may be result more than cause, anyway is an open question, and it is not easy to figure how to broke the vicious circularity

You really need to put in a bit more effort on these videos - here we have a discussion of the high correlation between trust and growth in nation-states and immediately underneath you state: "Trust cannot be underrated as an important SOURCE of growth and economic development. " There is no direct evidence presented to support this hypothesis other than the correlation. Its just such a disappointingly shallow understanding of the issues involved. I think it would also be interesting to look at the correlation between measures Trust and the GINI index for each country. As I suspect there might be quite a high correlation there also.